01 CSR vs ESG

CSR, or Corporate Social Responsibility, refers to the responsibility companies bear for their impact on society and the environment while generating profit and being accountable to shareholders. According to the definition proposed by the European Union in 2001, CSR is a voluntary initiative through which companies integrate social and environmental considerations into their operations and interactions with stakeholders.

ESG, which gained significant attention from 2020 onwards, was initially an investment philosophy focusing on environment, social, and governance. It has been referred to as a company's "second financial statement." Today, ESG has evolved from an investment concept into a crucial assessment framework capable of influencing corporate valuations.

To some extent, the definitions of ESG and CSR appear to overlap, leading some to suggest that ESG may eventually replace CSR. Both emphasise the importance of information disclosure, require the submission of relevant reports, and share the goal of promoting sustainable societal development. Both are also implemented by businesses, who are key actors in this process.

However, it is important to recognise that ESG and CSR are fundamentally different concepts and should not be conflated.

Firstly, their application contexts are different. CSR has a broader range of applications and emphasises a multi-stakeholder perspective. It can be seen in areas such as supply chain management, brand marketing, community engagement, and employee management. ESG, on the other hand, primarily focuses on the perspective of capital market investors, addressing the concerns of external stakeholders in the investment space.

Secondly, their viewpoints differ. CSR is more internally driven, with corporate management taking the initiative. It focuses on a company's contributions to charitable causes, employee welfare, and its environmental impact. In contrast, ESG is more externally oriented, addressing the concerns and needs of investors. ESG also expands the scope of focus from the environmental impact of individual businesses to the broader supply chain.

Lastly, the two have different priorities. CSR focuses on the process, while ESG emphasises outcomes. In practice, ESG priorities can shift depending on investor preferences, sometimes diverging from a company's key development goals and objectives.

In summary, CSR is about how a company tells its story, while ESG provides analytical, actionable data standards. The "G" in ESG stands for governance, which focuses on how companies and investors integrate environmental, social, and governance considerations into their business models. Similarly, CSR indirectly involves corporate governance, but the two have significantly different application contexts and perspectives.

02 DEI vs ESG

Now, let's discuss DEI, which some may feel has been missing from the conversation so far.

DEI stands for diversity, equity, and inclusion. As it is fundamentally a people-focused domain, these three principles of DEI are key components of the "S" factor in ESG and serve as an essential pillar for implementing ESG principles. In Western countries, where people are considered the core element of organisational development, DEI has been embraced as an advanced human resource management concept by leading corporations.

The core idea of DEI stems from the humanistic philosophy of the European Enlightenment and Renaissance, which emphasises the intrinsic value of individuals.

Within DEI, diversity and inclusion underscore the importance of diverse perspectives. It is believed that teams composed of individuals with different life experiences, educational backgrounds, and personal histories bring a wide range of perspectives and sources of information, thereby fostering greater creativity.

Equity and inclusion reflect a commitment to ethical values and fairness. For example, a company that hires individuals with disabilities is seen as more trustworthy than one that dismisses pregnant employees. A team that embodies DEI principles will also give its members a stronger sense of identity and belonging. Moreover, implementing inclusion helps improve the working environment, enhances employee satisfaction, and boosts both morale and productivity.

Research indicates that companies that adopt DEI practices gain advantages in creativity and efficiency, thereby positioning themselves as leaders in ESG development. In China, major enterprises such as PepsiCo, Pfizer, and Tencent have already begun implementing DEI management practices and disclosure measures.

03 From CSR to ESG to DEI

In conclusion, the evolution from CSR to ESG and then to DEI reflects the maturing of business practices and provides more precise metrics for assessing the environmental and sustainability performance of investable organisations.

Although there is significant overlap in the topics they address, DEI differs from CSR and ESG in terms of origin, positioning, and direction. Broadly speaking, CSR leans towards a management behaviour model originating from within the company. ESG serves as a non-financial performance metrics framework, and DEI focuses on organisational transformation. Overall, CSR and ESG are integrated to some extent in the "G" (governance) component, while DEI consolidates the human-related aspects of ESG and acts as a complement to related topics.